Mercury, a neobank targeting startups, has launched a new product called Vault, which offers Federal Deposit Insurance Corporation (FDIC) insurance up to USD 3 million, compared to the standard insurance cover of USD 250,000 per depositor per insured bank.

Clients with more than USD 3 million in their accounts will be requested to transfer cash to Mercury Treasury's Vanguard money market funds, which invest 99.5% of the funds in US government-backed securities held in the customer's name.

Customers will also be able to spread their deposits among 12 different banks to spread risk due to access to a sweep network through its banking partnerships with Choice Financial and Evolve Bank & Trust.

Mercury has more than 100,000 customers and claims that it has been profitable since August last year. It has processed more than USD 50 billion in transactions in 2022, compared to USD 23 billion in 2021. In addition, it claims that 50% of Y Combinator cohorts choose Mercury as their banking partner.

Analyst QuickTake: The new offering by Mercury comes in the backdrop of the collapse of Silicon Valley Bank (SVB), which primarily served startups. SVB suffered from liquidity challenges as a result of a bank run on the back of rising interest rates, asset-liability duration mismatch, and a muted funding environment. The FDIC took control of the bank on Friday, stating that it will back SVB deposits beyond the federally insured amount of USD 250,000 and offer access to all depositors’ funds.